Debt Counselling FAQ

Debt counselling (i.e. debt review) is a form of debt rehabilitation whereby a Consumer settles his debt obligations to creditors with the assistance of his Debt Counsellor and usually a payment agency.  The Debt Counsellor re-structures the debt of the Consumer by extending the contractual repayment period so that the Consumer is able to afford the restructured instalment and able to maintain himself and his family.  The Consumer pays one monthly instalment to a registered Payment Agency and this amount is then distributed to the Creditors by the Payment Agency. 

Anyone who is not able to meet all his monthly instalments required by his creditors would qualify for debt counselling. Juristic persons (i.e. companies) do not qualify for debt review and only private individuals can be under debt review.

All credit agreements as defined by the National Credit Act can be included in debt review.  This would include your loans, credit cards, vehicle agreement (if not a rental agreement) and bond.  What cannot be included in your debt review (without express permission from the creditor) are your service accounts, for instance your telephone account and municipal account.  Provision in your budget must be made for all accounts that cannot be included in your debt review.

The Consumer will not be blacklisted, but the credit bureaux must indicate that the Consumer is under debt review.

No.  All credit cards and accounts must be disclosed to the Debt Counsellor and the Consumer must be advised by the Debt Counsellor that they may not enter into any further credit agreements whilst they are under debt review.

This would depend on how much the Consumer is paying towards his debt.  If the Consumer is paying R1,000.00 towards a total debt of R100,000.00 then the period under debt review would be more lengthy than if the Consumer were paying R2,000.00 towards a total debt of R100,000.00.  The time period is calculated by means of a program so that the Consumer is able to know how long it would take to settle his debt.

No, not without the permission of that particular Creditor.

Yes, but it is not recommended until the full debt has been settled.

No.  Once a Consumer is placed under debt review, all legal action must stop.  A Creditor may thereafter not proceed against the Consumer provided the Consumer is making regular payments to the Payment Agency as recommended by the Debt Counsellor.

The Creditor can make a counter-offer and try and negotiate with the Consumer through the Debt Counsellor.  If settlement negotiations cannot be reached then the Debt Counsellor must approach the court with his recommendations and ask the court to consider and grant these recommendations.

The Consumer has the right to contact his Debt Counsellor and require a statement from him to show that the Creditors are being paid.

No, there are other options available to the Consumer and these can be discussed between the Debt Counsellor and the Consumer.  Debt Review is, however, more often than not the most favourable option to the Consumer.

A Debt Counsellor fulfills a statutory function and is the 'middle-man' between the Consumer and the Creditor.  As such, the Debt Counsellor should be impartial and objective.

One should apply for Debt Review as soon as the Consumer is not able to meet the monthly payments required from the Creditor.  It is not advisable to wait until a Creditor has issued a letter of demand and once a Summons has been issued, that particular account cannot usually be included in the debt review.

All debt review fees should be charged in accordance with the guidelines set by the National Credit Regulator, which are as follows:

• a fee of R50.00 for applying for debt review
• a fee that is equal to your first months instalment, subject to a maximum amount of R3,000.00 for a single applicant and R4,000.00 for a joint application.  [Your monthly instalment is determined after deducting your monthly expenses from your monthly income]
• an after-care fee of 5% of your instalment for a period of 2 years, and thereafter 3% of your instalment for the following 3 years

There are usually also legal fees involved, which must be disclosed to you upfront and is deducted from your second months instalment.

Payment to the Creditors may be stopped for a period of up to 60 business days.  The Debt Counsellors costs and legal costs are deducted from your first and second months instalments and your third instalment is then paid to the Creditors.

Yes, the debt review process is not inflexible and the Consumer is allowed to pay extra to the Creditors so that the debt can be settled within a shorter period.